* Shale gas can support 64,000 jobs, economic growth -government
* UK minded to approve second Cuadrilla permit after moreevidence
* Economics of shale gas in UK unclear - UK Energy ResearchCentre
* Commerical operation could start in 2018 - Cuadrilla (Updates with comments from Cuadrilla Chief Executive, updatesIGas share price)
By Karolin Schaps and Susanna Twidale
LONDON, Oct 6 (Reuters) - Britain's government approved itssecond-ever shale gas fracking permit on Thursday, overruling alocal authority decision and boosting the country's position asEurope's most promising shale gas exploration ground.
Britain's Secretary of State for Communities and LocalGovernment Sajid Javid gave the go-ahead for shale gas companyCuadrilla to carry out hydraulic fracturing, or fracking, at asite in northwest England.
The approval is only Britain's second since a moratorium onfracking was lifted in 2012 after Third Energy received thegreen light for a project in northern England in May.
Cuadrilla Chief Executive Francis Egan said further detailedplans have to be agreed with the local council, but thatconstruction could begin at the site by the end of the year,with drilling and first fracking taking place in 2017.
"Gas from the site could start flowing into the grid inearly 2018," he told Reuters.
Britain is estimated to have substantial amounts of shalegas trapped in underground rocks and the government wants toexploit it to help offset declining North Sea oil and gasoutput. It said the shale gas industry could create 64,000 jobsand help economic growth.
Britain, which will start procedures next year to leave theEuropean Union, currently imports about half of its gas needsand that could rise to as much as 93 percent by 2040 withoutshale gas, according to some calculations, as offshoreproduction wanes.
Despite government support, progress has been slow due toregulatory hurdles and public protests.
Environmental groups are concerned shale gas fracking couldcontaminate groundwater and that extracting fossil fuels isincompatible with the country's commitment to fight climatechange.
Javid also said he was minded to approve a second Cuadrillapermit but has asked for further evidence on road safety.
Australia's AJ Lucas holds a 46 percent stake inCuadrilla. Shares in London-listed shale gas company IGas, the only other company currently waiting for permitapproval, were up 12.5 percent at 1512 GMT.
The government's use of new powers to overturn a LancashireCounty Council rejection of the permits shows its readiness torule in favour of future fracking applications. The councilrejected the permits in 2015 due to concerns about noise andtraffic.
However, the market price for gas in Britain has droppedaround 30 percent since Cuadrilla first lodged its applicationin 2014.
"The economics of shale extraction in the UK are stillhighly uncertain. The costs of UK shale will not be cleareruntil a significant amount of exploratory drilling takes place,"said Jim Watson, director of the UK Energy Research Centre.
Egan said he is confident the fracked gas will becompetative with the cost of imported gas, such as liquifiednatural gas (LNG) imported in tankers most commonly from Qatar.
BRITAIN LEADS WAY IN EUROPE
Shale gas development has transformed the energy landscapein the United States and put it on the path to energyindependence.
But exploration has been slow in Europe, where planning andenvironmental regulations are much stricter and space isscarcer.
Britain's progress on shale gas exploration means it isEurope's most promising shale gas nation after projects inPoland were unsuccessful.
"We hope that this decision will set a good precedent forthe shale debate in other countries," said a spokesman for theBrussels-based International Association of Oil and GasProducers.
Network operator National Grid said Britain could be forcedto rely on other countries for 93 percent of its gas supplies by2040 if it did not support domestic gas extraction, includingshale gas.
(Additional reporting by Kate Holton; editing by Susan Thomasand Alexandra Hudson)
